Ownership, Economic Entrenchment and Allocation of Capital

Johan Erik Eklund () and Sameeksha Desai ()

No 123, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: In an efficient economy, capital should be quickly (re)allocated from declining firms and sectors to more profitable investment opportunities. This process is affected by the concentration of corporate control, which in turn is affected by market institutions. We employ a panel of 12,000 firms across 44 countries to estimate the functional efficiency of capital markets. We adapt a measure for the efficiency of capital allocation using the accelerator principle. Our empirical results show weak property rights and highly concentrated ownership reduce the functional efficiency of capital markets. Findings support the economic entrenchment hypothesis but not the legal origins hypothesis.

Keywords: Allocation of capital; accelerator principle; ownership; functional efficiency; economic entrenchment (search for similar items in EconPapers)
JEL-codes: G32 L20 P00 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn
Date: 2008-04-02

Downloads: (external link)
http://cesis.abe.kth.se/documents/WP123.pdf (application/pdf)

Related works:
Working Paper: Ownership, Economic Entrenchment and Allocation of Capital (2008)
Working Paper: Ownership, Economic Entrenchment and Allocation of Capital (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:hhs:cesisp:0123

Access Statistics for this paper

More papers in Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies
Address: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Contact information at EDIRC.
Series data maintained by Martin Andersson ().